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.Management Sciences
Category: Consumer Theory vs. Real Consumers
Suppose we measure the quantity of good X on the horizontal axis and the quantity of good Y on the vertical axis If indifference curves are bowed inward, as we move from having an abundance of good X to having an abundance of good Y, the marginal rate of substitution of good Y for good X (the slope of the indifference curve) ?
A. rises
B. stays the same
C. could rise or fall depending on the relative prices of the two goods.
D. falls
Refer to Exhibit 4, Suppose that the consumer must choose between buying socks and belts Also suppose that the consumer’s income is €100 Suppose that the price of a pair of socks falls from €5 to €2 The income effect is represented by the movement from point ?
A. X to point Y
B. X to point Z
C. Y to point X
D. Z to point X
The consumer’s optimal purchase of any two goods is the point where ?
A. the budget constraint crosses the indifference curve
B. the two highest indifference curves cross
C. the consumer reaches the highest indifference curve subject to remaining on the budget constraint
D. the consumer has reached the highest indifference curve
Which of the following statements is not true with regard to the standard properties of indifference curves ?
A. Indifference curves are downward sloping
B. indifference curves are bowed outward
C. Indifference curves do not cross each other
D. Higher indifference curve is preferred to lower ones
Refer to Exhibit 4, Suppose that the consumer must choose between buying socks and belts Also suppose that the consumer’s income is €100 A pair of socks is ?
A. an inferior effect
B. a Geffen good
C. a normal good
D. none of these answers
If consumption when young and when old are both normal goods, an increase in the interest rate ?
A. will always increase the quantity of saving
B. will always decrease the quantity of saving
C. will increase the quantity of saving if the substitution effect outweighs the income effect
D. will increase the quantity of saving if the income effect outweighs the substitution effect
Refer to Exhibit 4, Suppose that the consumer must choose between buying socks and belts Also suppose that the consumer’s income is €100 Suppose that the price of a pair of socks falls from €5 to €2 The substitution effect is represented by the movement from point ?
A. Z to point X
B. X to point X
C. X to point Z
D. Y to point X
If leisure is a normal good, an increase in the wage ?
A. will always increase the quantity of labor supplied
B. will increase the amount of labor supplied if the substitution effect outweighs the income effect
C. will increase the amount of labor supplied if the income effect outweighs the substitution effect
D. will always decrease the amount of labor supplied
Which of the following is true about the consumer’s optimum consumption bundle? At the optimum ?
A. the slope of the indifference curve equals the slope of the budget constraint
B. the indifference curve is tangent to the budget constraint
C. the relative prices of the two goods equals the marginal rate of substitution
D. none of these answers are true
E. all of these answers are true
If an increase in a consumer’s income causes the consumers to decrease her quantity demanded of a good, then the good is ?
A. a substitute good
B. a normal good
C. a complementary good
D. an inferior good
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